Unilever Ghana Ltd (UGL) makes three main product lines of soap in batches. The management of UGL is reviewing the cost accounting policy concerning overheads. Currently, the company absorbs overheads based on direct labour hours. Some management board members feel that the company should switch to activity-based costing (ABC) since the product lines demand its overhead resources differently. You have been asked to demonstrate the difference between the existing and the proposed methos of dealing with overheads. The following information is available to assist you: Materials (ghc12 per kilo) Labour (ghc9 per hour) Machine hours per unit Units per batch Sales price Sales demand (units) Overhead Cost Machine related Quality testing Machine set up costs Material movements Geisha 36 9 6 minutes 40 63 3,200 74,500 16,950 54,350 60,000 Sunlight 18 18 12 minutes 60 58 3,600 Driven by machine hours Driven by number of units Driven by number of atch Driven by number of kilos Lifebouy 24 13.5 6 minutes 75 60 4,500 You are required to: Calculate the profit or loss on each product using The traditional volume-based absorption or application method Activity-based costing method of absorbing or applying overheads

Unilever Ghana Ltd (UGL) makes three main product lines of soap in batches. The management of UGL is reviewing the cost accounting policy concerning overheads. Currently, the company absorbs overheads based on direct labour hours. Some management board members feel that the company should switch to activity-based costing (ABC) since the product lines demand its overhead resources differently. You have been asked to demonstrate the difference between the existing and the proposed methos of dealing with overheads. The following information is available to assist you: Materials (ghc12 per kilo) Labour (ghc9 per hour) Machine hours per unit Units per batch Sales price Sales demand (units) Overhead Cost Machine related Quality testing Machine set up costs Material movements Geisha 36 9 6 minutes 40 63 3,200 74,500 16,950 54,350 60,000 Sunlight 18 18 12 minutes 60 58 3,600 Driven by machine hours Driven by number of units Driven by number of atch Driven by number of kilos Lifebouy 24 13.5 6 minutes 75 60 4,500 You are required to: Calculate the profit or loss on each product using The traditional volume-based absorption or application method Activity-based costing method of absorbing or applying overheads

Name: Unilever Ghana Ltd (UGL) makes three main productlines of soap in bat
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Description: Unilever Ghana Ltd (UGL) makes three main productlines of soap in batches. The management of UGL isreviewing the cost accounting policy concerningoverheads. Currently, the company absorbs overheadsbased on direct labour hours. Some managementboard m

FINANCIAL ACCOUNTING

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ISBN:9781259964947

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Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Concept explainers

Process Costing

Process costing is a sort of operation costing which is employed to determine the value of a product at each process or stage of producing process, applicable where goods produced from a series of continuous operations or procedure. 

Job Costing

Job costing is adhesive costs of each and every job involved in the production processes. It is an accounting measure. It is a method which determines the cost of specific jobs, which are performed according to the consumer’s specifications. Job costing is possible only in businesses where the production is done as per the customer’s requirement. For example, some customers order to manufacture furniture as per their needs.

ABC Costing

Cost Accounting is a form of managerial accounting that helps the company in assessing the total variable cost so as to compute the cost of production. Cost accounting is generally used by the management so as to ensure better decision-making. In comparison to financial accounting, cost accounting has to follow a set standard ad can be used flexibly by the management as per their needs. The types of Cost Accounting include – Lean Accounting, Standard Costing, Marginal Costing and Activity Based Costing.

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Question

Unilever Ghana Ltd (UGL) makes three main product
lines of soap in batches. The management of UGL is
reviewing the cost accounting policy concerning
overheads. Currently, the company absorbs overheads
based on direct labour hours. Some management
board members feel that the company should switch to
activity-based costing (ABC) since the product lines
demand its overhead resources differently. You have
been asked to demonstrate the difference between the
existing and the proposed methos of dealing with
overheads. The following information is available to
assist you:
Materials (ghc12 per kilo)
Labour (ghc9 per hour)
Machine hours per unit
Units per batch
Sales price
Sales demand (units)
Overhead Cost
Machine related
Quality testing.
Machine set up costs
Material movements
Geisha
36
9
6 minutes.
40
63
3,200
74,500
16,950
54,350
60,000
Sunlight
18
18
12 minutes
60
58
3,600
Driven by machine
hours
Driven by number of
units
Driven by number of
atch
Driven by number of
kilos
Lifebouy
24
13.5
6 minutes
75
60
4,500
You are required to:
Calculate the profit or loss on each product using
The traditional volume-based absorption or application
method
Activity-based costing method of absorbing or
applying overheads

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Which of the following statements is false? (You may select more than one answer.)a. In recent years, most companies have experienced increasing manufacturing overhead costs in relation to direct labor costs.b. Activity-based costing systems may use direct labor-hours and/or machine-hoursto assign unit-level costs to products.c. Facility-level costs are not caused by particular products.d. Product-level costs are larger for high-volume products than for low-volumeproducts.
Which of the following statements is incorrect? O A. If MOH is overallocated to a job that has been sold, and the company calculates sales price by marking up job costs, the job will likely be underpriced. O B. The formula to arrive at the POHR is total budgeted manufacturing overhead divided by total estimated allocation base. O C. To calculate the increase to WIP for allocated MOH costs, the POHR is multiplied by the actual amount of the allocation based used by the cost object. D. "Number of units" is typically not an appropriate allocation base for MOH because the company's products do not consume equal overhead resources. If the over/underallocated MOH is fairly large and the majority of the units have not been sold, the balance in MOH should be prorated between WIP, FG, and COGS. O E.
What is the best reponse to this post? ob costing is a way for businesses to manage the costs and profitability of a specific job or project. This type of cost accounting is most beneficial to companies that make custom/unique products. An industry that may choose job costing is a construction company. They may specialize in a particular service, such as installing water pipes underground, but each project will vary in size, length, location, etc. They would use this method because each project would vary widely, so you could not spread the costs evenly for each one. Process costing is a way of evenly spreading costs for their products because all products are either mass-produced or very similar. An example of a company that would use process costing is a paper company. They produce one product in large quantities to allocate the costs evenly for each batch produced. The main difference between the two is how the overhead is assigned to the product, where job costing is more for…
What is a good response to? Activity-based costing (ABC) has transformed how organizations measure and manage costs by breaking overhead costs into cost pools based on activity (Kenton, 2024). ABC allocates overhead costs based on a particular activity instead of spreading it out evenly. This gives management clear information to determine which activities benefit the company and which may need to be altered or discontinued. An example of a company using ABC could be electrical costs. If the electrical costs fluctuate based on labor hours, management could use the labor hours as a cost driver. They could determine the cost driver rate by dividing the electric costs for the year by the annual labor hours. Once they determine the cost rate, they can multiply that by the electrical hours used for an activity to calculate the cost. In the example given, it would be pretty easy to implement; however, there are several overhead costs to calculate, which would require a lot of record-keeping,…
Utica Manufacturing (UM) was recently acquired by MegaMachines, Inc. (MM). and organized as a separate division within the company. Most manufacturing plants at MM use an ABC system, but UM has always used a traditional product costing system. Bob Miller, the plant controller at UM, has decided to experiment with ABC and has asked you to help develop a simple ABC system that would help him decide if it was useful. The controller's staff has identified costs for the first month in the four overhead cost pools along with appropriate cost drivers for each pool. Activity Drivers Direct material cost Costs 154, 000 1,600, 900 900, 000 450, 000 Cost Pools Incoming inspection Production Machine-hours Machine setup Shipping Setups Units shipped The company manufactures two basic products with model numbers 308 and 510. The following are data for production for the first month as part of MM. Products 308 510 $ 45,000 $173,800 50,000 $ 32,000 $283,809 118,800 Total direct material costs Total…
Answer the following 3 questions:
Nichols Inc. manufactures remote controls. Currently the company uses a plant- wide rate for allocating manufacturing overhead. The plant manager believes it is time to refine the method of cost allocation and has the accounting department identify the primary production activities and their cost drivers: Activities Material handling Assembly Inspection Cost driver Number of parts Labour hours Time at inspection station The current traditional cost method allocates overhead based on direct manufacturing abour hours using a rate of £200 per labour hour. a. b. Allocation Rate £2 per part £20 per hour £3 per minute What are the indirect manufacturing costs per remote control assuming an activity- based-costing method is used and a batch of 50 remote controls are produced? The batch requires 100 parts, 6 direct manufacturing labour hours, and 2.5 minutes of inspection time. £4.00 per remote control £6.55 per remote control £24.00 per remote control £327.50 per remote control C. d.